The Netherlands has been a trading nation for centuries due to its open economy and outlook. The Dutch are seasoned travellers. They are proficient in languages and skilled in negotiating trade agreements and implementing projects against the odds.
As an open economy, the Netherlands is susceptible to international developments, notably in recent years the global recession – which has been exacerbated by falling share prices, the attacks of 11 September 2001, the war in Iraq and the outbreak of SARS.
Nevertheless, the Netherlands was the world’s eighth largest exporter of goods and services in 2003. Its workforce numbered 7.5 million, three-quarters of whom worked in the service sector. Per capita gross domestic product (GDP) was €27,900. The unemployment rate was 5.3%. And growth was strongest in the public sector, education and health care.
Negotiation
The Dutch economic system is based on consensus. The Netherlands has a long tradition of negotiation, which lives on in close and regular contacts between trade unions, employers’ organisations and government. Employers and employees also hold regular talks. Government interferes as little as possible.
The Dutch consensus culture also seems to withstand recession. Employers and employees always manage to agree, for instance, to limit pay increases in the long term in order to compete on world markets. Dutch competitiveness has been under strain since 2000 as the euro has risen in value and labour costs have grown.
Economic activities and their share of GDP in 2003
Economic activity | % of GDP |
Agriculture and fisheries | 3 |
Extractive industries | 2 |
Industry | 36 |
Services | 50 |
Public sector | 9 |
Total | 100 |
Source: Statistics Netherlands (2003)
The world’s top ten exporting countries in 2002
Country | Exports in billions of USD |
United States | 957 |
Germany | 692 |
Japan | 480 |
France | 409 |
United Kingdom | 384 |
PR China (Mainland) | 358 |
Italy | 309 |
The Netherlands | 295 |
Canada | 288 |
PR China (Hong Kong) | 243 |
Source: IMD (2003)
Strategic position
Traversed by the rivers Rhine, Maas and Scheldt as they meander towards the North Sea, the Netherlands is a hub of transport and distribution: a natural gateway to Europe and centre for multinational enterprise. Its advantages include an advanced infrastructure both for transport and telecommunications. Many Asian and North American imports to Europe are transhipped at Rotterdam or Amsterdam, the country’s two transport centres.
The seaport of Rotterdam is the largest in the world, transshipping tens of millions of tonnes of goods per year. And Amsterdam Schiphol Airport is the fourth largest airport in Europe for both passenger and goods traffic. Dutch transport companies are clustered around the two main import and export centres: Amsterdam Schiphol Airport and the seaport of Rotterdam.
The best-known transport companies are Nedlloyd, Frans Maas and Smit International. The world’s oldest national airline, KLM Royal Dutch Airlines, had to merge with French airline Air France in 2003.
International trade
More than half of the country’s GDP comes from international trade. Over half of Dutch imports and exports consist of food, chemical products and machinery – the last category consisting largely of computers and computer parts. A large proportion of Dutch imports, including computers, are destined for other countries. They are re-exported with little or no processing – typifying the country’s role as a hub of distribution.
Two-thirds of Dutch exports go to just five countries: Germany, France, Belgium, the United Kingdom, and the United States. Twenty-four per cent goes to Germany, the Netherlands’ largest trading partner. On 1 May 2004, the European Union welcomed ten new member states, As before, the Netherlands can benefit from enlargement. Dutch trade with the new member states is already growing fast. From 1993 to 2002, Dutch exports to these countries grew by 17%.
Multinationals
Many Dutch companies operate globally. The Netherlands’ three largest international trading companies are Ahold, SHV Holdings and Hagemeyer. Many manufacturers, such as Unilever Philips, Akzo Nobel and Shell, also do a great deal of trade.
Dredging is a Dutch specialty and companies such as Boskalis, HAM and Ballast Nedam have larger foreign operations than domestic ones. And KPN Nederland is a major player in international telecommunications, working with many non-Dutch companies.
Dutch manufacturers too have a global outlook. They export goods worldwide, maintain subsidiaries in many countries and often join forces with foreign partners. The main manufacturing industries are chemicals, food processing, metalworking and the refining of gas and oil. The printing and electronic engineering industries are also world-class. Dutch metalworking companies specialise in making machinery driven by advanced electronic controls, a speciality that has turned the Netherlands into a world leader in the manufacture of vehicles, food processing equipment and machinery for the chemical industry. It has also bolstered the electronics industry.
In 2002, computers and computer parts contributed most to the growth of exports to emerging markets such as Central and Eastern Europe.
Services and technological cooperation
In recent years, services have grown into the Netherlands’ largest economic sector. The largest service industry is trade, followed by transport and telecommunications, construction, banking and insurance, and other financial services. The two largest banks are ABN Amro and ING, which operate worldwide, serving Dutch and non-Dutch businesses as well as governments.
Although commercial services as a whole contracted in 2003, telecommunications and financial services expanded. Information and communications technology (ICT) seems best positioned to grow, especially where combined with innovation. ICT is expected to benefit productivity in all sectors. By linking businesses in networks, it enables them to benefit from each other’s investments.
Government incentives
In January 2004, the government launched its Innovation Partnerships Grant Programme to promote cooperation in research and development. The Programme encourages businesses and public-sector knowledge institutes to study and launch national and international partnerships. By drawing on each other’s knowledge and expertise, businesses will become better placed to face the competition, improve their knowledge base and make the Dutch economy more innovative. Around 5,000 Dutch companies are conducting research to develop new products and to boost quality and efficiency. The country’s five largest multinationals – Philips, Shell, Akzo Nobel, DSM and Unilever – are at the forefront of industrial research and development.
The power industry
The north of the Netherlands contains huge reserves of natural gas, making it Western Europe’s largest producer. Drilling companies operate in gas and oil fields both on land and in the waters off the Netherlands’ North Sea coast.
A crucial link in Western Europe’s energy supply chain is the seaport of Rotterdam, where large quantities of crude oil arrive by vessel. The port is home to large transhipment companies and refineries, from which considerable quantities of crude oil and its petroleum products are carried directly to the industrial areas of Germany and Belgium.
The presence of refineries and offshore installations has led to an array of activities serving the oil and gas industries. Four large steel construction companies, for instance, design and build entire chemical factories, oil refineries and offshore installations. And dozens more businesses produce specialist equipment. Several Dutch research institutes even have laboratories for simulating offshore conditions.
International policy on carbon dioxide
Reducing emissions of greenhouse gases, as required by the Kyoto Protocol, is one of the world’s most difficult environmental problems, closely linked as these emissions are to economic growth. The Dutch government acts to cut emissions and binds manufacturers to strict environmental standards. But the Netherlands’ emissions of carbon dioxide have increased in recent years, mainly because the export-driven Dutch oil, transport and chemical industries are all such voracious consumers of energy.
Given the Dutch economy’s strong focus on exports, acting nationally to cut greenhouse gas emissions is more expensive than acting internationally. Emission-reducing measures raise the cost of Dutch exports substantially. The European system of trading emissions due to start in 2005 offers the Netherlands an efficient way of meeting the Kyoto Protocol target. It will allow the Netherlands to buy emission permits from other countries, which will then reduce their emissions accordingly, saving the Netherlands from having to take more expensive measures.
For more information on the topics discussed in this chapter, contact the Ministry of Economic Affairs: www.minez.nl